Introduction OECD has defined cross-border alliances (also called international strategic alliances) as a form of strategic partnership formed between two or more firms from different countries for the sole purpose of pursuing mutual interests through sharing resources and capabilities (OECD 2000, 34). The individual firms that enter into strategic alliance do not operate in direct competition but have similar products and services, which are directed towards same target market. Cross-border alliances are inevitable in the modern business world and provide flexibility to companies. The alliances help firms seal gaps between present and future resource requirement.
Formation of strategic cross-border alliances brings competitive advantages to business in terms of risk reduction, increased access to new technologies and low cost resources. In the last few years, there has been a steady explosion of strategic alliances across industries. Some of these alliances include: In an effort to establish a leading market presence in Japan and Europe, Nasqad entered into agreements with SSI Technologies to develop an internet-based marketing system. The joint venture led to successful launch of Nasqad Europe and Nasqad Japan (OECD 2000, 34). The Star Alliance is the largest partnership in the air travel industry in the world.
The alliance’s reach extends to more than 130 countries and more than 800 destinations. In 2001, Coca Cola and Procter and Gamble (P& G) announced a multi-billion joint venture deal to use Coca Coal’s extensive distribution system to market P& G’s products and reduce distribution time (OECD 2000, 37). Technology giant Hewlett-Packard and NTT DoCoMo signed a strategic partnership deal to conduct joint research and develop programs for fourth generation cell phones. The partnership brought together DoCoMo’s broadband technology and HP’s well established network infrastructure.
Several other technology companies have formed strategic alliances to take advantage of the partner’s more established distribution channels, distribution systems, brand reputation and reduced market competition. Other companies enter into alliances because of reasons such as cost reduction, geographic expansion and supply-chain synergies. Importance of Cross-Border Strategic Alliances in the Internationalization Process In the international competition-paced world of business, strategic alliances are a way to gain access to partner firm’s strategic resources including technologies, people, capital and market. Ahuja has asserted in his article that teaming up with others not only adds complementary production and marketing capabilities, but also gives opportunities for partnering firms to expand more rapidly and efficiently (Ahuja 2000, 320).
It is for this reason that newly established and fast growing companies rely on alliances to extend operational and technical resources. This way, they save time and boost market presence by not having to develop their own strategies from the scratch. Hence firms get the freedom to concentrate on innovation and other core aspects. Firms have recognized that both cooperation and competition are necessary to ensure optimal and innovation- led survival and growth.
Strategic alliances in the international scale are one of the most powerful and innovative mechanisms that combines competition and co-operation for industrial restructuring in the global stage. Unlike other forms of internationalization such as foreign direct investment, cross-border strategic alliances provide companies with the necessary strategic flexibility to respond to the threat of new competitors and changing market conditions (Ahuja 2000, 323). While these alliances are motivated by a wide range of factors, they achieve similar objectives and help increase the partnering firms’ organizational and financial performance (Ahuja 2000, 328).